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ANNUAL REPORT 2009
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Masterminding marine solutions
through safety and innovation
Master Marine AS is a Norwegian offshore service company specia-
lised in transport and offshore installation of heavy structures
for the Oil & Gas and Offshore Wind Industry. The company has
through the past decade developed and “master -minded” a concept
based on innovation and technology for the offshore energy market.
Master Marine's Jack-up Construction Vessel known as "Service Jack"
provides a safer, environmental friendly, time and cost effec-tive
alternative for load out, transportation, offshore installation and
hook up of heavy structures. The “Service Jack” Vessels are fully
self contained, able to install offshore structures with weights
ranging up to 7 200 T, replacing the need for several barges, tugs,
crane- and accommodation vessels normally associated in offshore
field development. Because of the Jack Up configuration the vessels
are less weather sensitive than
any competing technology for offshore load transfer
operations.
“SERVICE JACK” Versatile Units offering:
- Load out of structures by own gear - Transportation to field
by own propulsion - Positioning and station keeping by DP2 system -
Elevation of laden hull by jacking system - Installation of
structures by skidding or lifting - Accommodation and tender rig
during Hook Up phase
SERVICES
- Accommodation - Offshore Wind Park Installation - Platform
installation - Platform modification & maintenance - Subsea
installation
- Decommissioning
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ANNUAL REPORT 2009
MASTER MARINE AS
CONTENTS:
Report of the Board of Directors 2
Consolidated Financial Statements of Master Marine Group 2009
5
Financial Statements of Master Marine AS 2009 33
Auditors report 61
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REPORT OF THE BOARD OF DIRECTORS
MASTER MARINE AS
Master Marine AS Master Marine AS, established in 1997, has its
main office at Drammensveien 288 in Oslo,
Norway. The Group specializes in transport and offshore
installations of heavy structures for
the energy industry as well as offshore accommodation. Master
Marine‟s goal is to become the
most reputed and professional supplier of marine transportation,
offshore installation and hook-
up support services of heavy structures – known for its
innovative solutions. Master Marine,
with its experienced human capital, it‟s safe and
environmentally friendly operation, cost
efficient and predictable execution and modern marine equipment,
shall work to satisfy its
customers in order to be their first choice in marine
operations. Through its position as the
preferred supplier of marine operations Master Marine shall
create value to its shareholders by
maximizing the return on their investment.
Operations The Group has over several years invested in research
and design of an alternative concept for
offshore installation, platform modifications, wind turbine
installation and transport, thereby
providing a safer, more environmentally friendly and cost
effective solution for the installation
of structures of up to 7200 tons.
The overall activity level in the Group during the last year has
been very high, and the main
focus has been on yard follow up as well as financing of the
project and securing future
contracts for the Service Jack 2. The total contract backlog for
Master Marine is currently in
excess of EUR 340 million.
The Service Jack 1 will serve as an accommodation unit on
Ekofisk field for ConocoPhillips
and the contract is scheduled to start in the fall of 2010. The
Service Jack 2 will start
installation work of wind turbines for Statoil/Statkraft early
in 2011.
Organization, workplace environment and employees During 2009
the activity level has increased rapidly in the Group. The number
of Group
employees has increased to 33 and there are a significant number
of consultants assisting at the
yard and on the ConocoPhillips project.
For 2009 the total sick leave was 1%, in 2008 the sick leave was
also 1%. The Group had no
serious accidents resulting in personal injury or material
damages. Drydocks World in Batam
had a few serious accidents which also led to death.
It is the Group‟s objective to create a work environment with
equal opportunities for both men
and women. The Group does not discriminate on the grounds of
sex, race or religion in any
area, including recruitment, pay and promotion. Of the 33 people
employed at the end of the
year, 7 were female.
Environmental Reporting The Group will, when fully operational,
have two units in operation and will work to ensure
that all sides of its operation are conducted in an
environmentally friendly way. During the
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construction of the vessels the Group is actively monitoring the
construction to ensure that all
aspects of health, safety and environment industry standards are
being followed.
Master Marine is in the process of expanding from an offshore
consultancy to an international
offshore heavy-lift/installation/transportation and
accommodation company, with the ongoing
construction of the Service Jack vessels. As a part of this
transition to vessel operator, Master
Marine has initiated the overhaul and further development of its
Integrated Management
System (IMS).
As a growing knowledge organization the Group must ensure
compliance with both national
and international laws and regulations on quality assurance,
occupational health, safety,
security and environment.
To meet the specific needs, requirements and regulations for
Master Marine core business -
shipboard operations and project execution, it is the intention
to achieve an ISO 9001-2008
(quality management in the organization) certification within
2010. A seamless system which
also covers “ISO 14001, Management of Environment” and “OHSAS
18001, Occupational
Health and Safety” and the “International Safety Management
Code” will be subject to
certification. The objective is to identify, review and manage
the overall risk elements in the
Group‟s operations.
Overview of the development and results The building of the two
vessels has been a continuing activity at Drydocks World Graha
(former Labroy Offshore Ltd) in Batam, Indonesia. An
installation contract with Scira Offshore
Energy Limited (Statoil/Statkraft) was signed in April.
The Group worked throughout 2009 to secure financing and reached
a solution in October,
making Nordic Capital the major shareholder in the Group. The
Group received 130 MEUR in
new equity and the existing convertible bond was converted to
equity. In addition a Term Loan
on 140 MEUR was made available by Nordic Ocean Limited. The
Group was delisted from
OTC
Results
The operating income for 2009 was TEUR 2.740 and the operating
loss was TEUR 12.320. The
financial items including changes in the convertible bond and
its conversion to equity, gave a
positive contribution of TEUR 41.843. This resulted in a profit
for the year of TEUR 29.523.
The comprehensive income is also TEUR 29.523 compared to a loss
of 876 in 2008.
The profit for 2009 is proposed allocated to share premium
reserve. The board of directors has
not proposed any dividends for 2009.
The financial statements are prepared in accordance with
international Financial Reporting
Standards (IFRS) and interpretations adopted by the
International Accounting Standards Board
(IASB) and IFRIC as approved by the European Union, and the
additional relevant
requirements under the Norwegian Accounting Act. Master Marine
AS has assessed the
functional currency to be EURO, which is also the reporting
currency.
Cash flow and liquidity
Operational cash flow in 2009 was TEUR -5.879. Cash flow from
investments was TEUR -
180.381 and cash flow from financing was TEUR 111.204. This gave
a net decrease in cash
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and cash equivalents in 2009 of TEUR 75.056. As a result of this
the Group had a cash reserve
of TEUR 21.890 at the end of 2009.
The Group is now fully funded to finalize the building of both
vessels and prepare for
operation.
Financial Exposure The Group is exposed to a number of different
financial market risks including the possibility
that fluctuations in currency exchange rates, interest rates and
day rates will affect the value of
the Group‟s assets, liabilities and future cash flows. The Group
frequently reviews and assesses
its primary financial market risks to reduce and control these
risks. See more information in
Note 10.
Continued Operations The Board confirms that the assumption of
continued operations forms the basis for the annual
accounts in accordance with the requirements of the Accounting
Act. The basis for this is the
Group‟s order backlog in excess of EUR 340 million.
Future Prospects Future prospects for the Group depend on the
activity in the oil and gas industry, and the
number of new installations, modifications and decommissioning
of offshore installations.
Because of the financial crisis the short term market for new
oil and gas installations might
decrease. However, the design of Service Jack makes it
well-equipped to adapt to other
markets.
This is especially visible through the 3-5 year contract with
ConocoPhillips for delivery of an
accommodation unit at Ekofisk field, with a contract value of
some EUR 265 million for the
fixed period. Another important market is the expanding offshore
wind turbine installations.
The fact that EU has committed itself to massive reductions of
CO2 emissions makes this an
interesting market for the next decade. The contract which the
Group entered into with Scira
Offshore Energy Limited clearly demonstrates the market
opportunities within this business
area for Master Marine.
Oslo, 22 April 2010
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CONSOLIDATED FINANCIAL STATEMENTS 2009
Master Marine AS
Consolidated Comprehensive Income
1 January - 31 December
2009 2008
3 2,740 203
TOTAL OPERATING INCOME 2,740 203
5 -2,867 -1,923
4 -5,423 -6,734
Impairments 12 -6,711
12 -59 -40
-15,060 -8,697
OPERATING PROFIT / (LOSS) -12,320 -8,494
7 52,831 6,576
7 -18,561 -1,852
34,270 4,724
21,950 -3,769
Changes in terms conv. Bond 7.9 -2,219
7.9 7,573 5,112
29,523 -876
11 - -
29,523 -876
Consolidated Stement of Comprehensive Income
Net profit this period 29,523 -876
Other comprehensive income - -
COMPREHENSIVE INCOME 29,523 -876
Allocation of comprehensive income
Share premium reserve 29,523 -464
Retained earnings -412
Earnings per share:
- Basic 0.05 -0.01
- Diluted 0.05 -0.01
Notes
Audited Audited
Financial expenses
(In EUR 1.000)
Income
OPERATING EXPENSES
Salary and personnel costs
Other operating expenses
Depreciation
TOTAL OPERATING EXPENSES
FINANCIAL INCOME AND EXPENSES
Financial income
NET PROFIT (LOSS)
(In EUR 1.000)
NET FINANCIAL ITEMS
Net result before changes in fair value of
derivative of convertible bond (CB)
Changes in fair value of derivative of CB
PROFIT/(LOSS) BEFORE TAX
Income tax expense (benefit)
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Oslo, 22 April 2010
Master Marine AS
Consolidated Statement of Financial Position
(In EUR 1.000) 31.12.2009 31 12.2008
ASSETS
Non-current assets:
Property, plant and equipment 12 315,709 135,670
Intangible assets 12 220
Total non-current assets 315,929 135,670
Current assets:
Other current assets 14 3,102 1,986
Cash and cash equivalents 15 21,890 95,464
Total current assets 24,992 97,450
TOTAL ASSETS 340,922 233,120
EQUITY AND LIABILITIES
Paid in capital:
Issued capital 17 25,754 954
Share premium 17 245,320 100,029
Other paid in capital 17 59 59
Total paid in capital 271,133 101,042
Other equity:
Retained earnings
Total other equity
Total equity 271,133 101,042
Non-current liabilities:
Convertible bond 9 - 40,118
Embedded derivative conv. bond 9 - 7,629
Other long-term liabilities 9 50,396 58,462
Total long-term liabilities 50,396 106,209
Current liabilities:
Accounts payable 18 10,432 21,537
Other current liabilities 18 8,960 4,332
Total current liabilities 19,392 25,869
Total liabilities 69,788 132,078
TOTAL EQUITY AND LIABILITIES 340,922 233,120
Notes
Audited Audited
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Master Marine AS
Consolidated Statement of Changes in Equity
(In EUR 1.000)
Total
equity
Equity as at January 1, 2008 647 70,284 412 71,343
Share issues 306 30,209 30,515
Warrants to Board memebers 59 59
Profit/(loss) for the period -464 -412 -876
Equity as at December 2008 954 100,029 59 101,042
Share issues 22,298 103,256 125,554
Warrants to Board memebers
Debt conversion* 2,503 12,513 15,015
Comprehensive Profit/(loss) for the period 29,523 29,523
Equity as at December 2009 25,754 245,320 59 271,133
*For more information regarding the debt conversion see note
9
Other paid
in capital
Retained
earnings
Share
premium
Share
Capital
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Master Marine AS
Consolidated Cash Flow Statements
(In EUR 1.000)
Cash flow from operating activities:
Profit/(loss) after tax 29,523 -876
Adjustment to reconcile profit/(loss after tax to net cash
flows:
Non-cash items:
Depreciation and impairment of property, plant and
equipment 12 6,771 40
Financial income 7 -52,831 -6,576
Financial expenses 7 18,561 1,852
Changes in fair value of financial instruments 7.9 -7,573
-5,112
Changes in terms conv bond 7.9 - 2,219
Working capital adjustments:
Increase in trade and other receivables 14 -1,116 -1,902
Increase in trade and other payables 18 787 4,233
Net cash flow from operating activities -5,879 -6,122
Cash flow from investing activities:
Proceeds from sale of property, plant and equipment - 31
Purchase of property, plant and equipment, net of cash 12
-184,352 -49,120
Purchase of intangible assets -220
Interests received 568 4,272
Net gain financial investments - -
Net realized agio 3,623 2,268
Net cash flow from investing activities -180,381 -42,549
Cash flow from financing activities:
Proceeds from issue of shares 17 125,554 30,515
Net proceeds from borrowings 9 - 58,462
Repayment of borrowings -
Interest paid -14,349 -5,234
Net cash flow from financing activities 111,204 83,743
Net increase/(decrease) in cash and cash equivalents -75,056
35,073
Net currency translation effect 1,482 -9,878
Cash and cash equivalents at beginning of period 15 95,464
70,270
Cash and cash equivalents at end of period 21,890 95,464
Audited
Year ended
December 31,
2008Notes
Audited
Year ended
December 31,
2009
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Notes
1. General information
Master Marine AS (“Master Marine” or “the Group”) is a private
limited company,
incorporated in Norway. The headquarter is in Drammensveien 288,
0283 Oslo, Norway.
Master Marine is an offshore service company, specialising in
transport and offshore
installation of heavy structures for the energy industry, and
offshore accommodation.
The consolidated financial statements of Master Marine AS
incorporate the financial statements
of the company and its subsidiaries (referred to collectively as
“the Group”)
The annual report was approved by the board of directors 22.
April 2010.
2. Summary of significant accounting policies
2.1 Statement of compliance The financial statements of Master
Marine have been prepared in accordance with International
Financial Reporting Standards (IFRS) and interpretations adopted
by the International
Accounting Standards Board (IASB) and IFRIC as approved by the
European Union (“EU”), as
well as the additional relevant requirements under the Norwegian
Accounting Act.
2.2 Basis of preparation
The financial statements have been prepared under the historical
cost convention, modified by
financial assets and financial liabilities (including derivative
instruments) at fair value through
profit or loss.
The statement of comprehensive income is presented by nature of
costs (IAS 1). The principal
accounting policies are set out below.
2.3 Functional currency and presentation currency Master Marine
applies Euro as reporting currency for its financial statements,
which is also the
functional currency of the Group.
2.4 Adoption of new and revised standards and interpretations
The Group has in 2009 adopted Revised IAS 1 “Presentation of
Financial Statements” effective
for the financial year beginning on 1 January 2009, requiring a
new statement; comprehensive
income, which to a large extent replaces the income statement.
Comprehensive Income
includes all the gains and losses recognised in the accounts
during a period – ie, both income
statement items and items recognised directly in equity that are
not transactions between
owners. The adoption had no material impact of the financial
statements of the Group other
than this. Furthermore the balance sheet has been renamed
Statement of Financial Position.
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No other standards or interpretations that have material impact
on the Group have been
implemented in 20091.
(a) Early adoptions of standards and interpretations No
standards or interpretations have been early adopted in 2009.
(b) Standards and interpretations in issue not yet adopted
Management anticipate that the standards and interpretations in
issue but not yet effective will
be adopted in the financial statements when they become
effective, and foresee currently no
material impact by the adoptions on the financial statements of
the Group in the period of initial
application, however this will be further assessed upon
implementation.
2.5 Significant accounting judgments, estimates and assumptions
The preparation of the financial statements requires management to
make judgments, estimates
and assumptions that affect the reported amounts of revenues,
expenses, assets and liabilities,
and the disclosure of contingent liabilities, at the reporting
date. Management bases its
judgments and estimates on historical experience and on various
other factors that are believed
to be reasonable under the circumstances, the results of which
form the basis for making
judgments about the carrying values of assets and liabilities
that are not readily apparent from
other sources. Uncertainty about these assumptions and estimates
could result in outcomes that
could require a material adjustment to the carrying amount of
the asset or liability affected in
the future. The key sources of judgement and estimation of
uncertainty at the balance sheet
date, that have a significant risk for causing a material
adjustment to the carrying amounts of
assets and liabilities within the next financial year are
discussed below.
Estimates and assumptions
Impairment
Management assesses whether there are any indications of
impairment for all non-financial
assets at the reporting date. The units under production are
tested for impairment when there
are indications that the carrying values may not be recoverable.
When value in use calculations
are performed, management must estimate the expected future cash
flows from the assets or
cash-generating unit and choose a suitable discount rate in
order to calculate the present value
of those cash flows. These are based on management‟s
evaluations, including estimates of
future performance, revenue generating capacity of the assets,
and assumptions of the future
market conditions. Changes in circumstances and in management‟s
evaluations and
assumptions may give rise to impairment losses. The carrying
value of the units was TEUR
315,505 and 135,432 as of 31 December 2009 and 2008,
respectively
2.6 Revenue recognition Revenue is recognised at the time of the
transaction when it is probable that the transaction will
generate future economic benefits that will flow to the Group
and the amount can be reliably
estimated. Revenues are presented net of value added tax and
discounts.
Lease income from operating leases is recognised in income on a
straight-line basis over the
lease term, unless another systematic basis is more
representative of the time pattern in which
use benefit derived from the leased asset is diminished.
1 IFRS 8 was early-adopted in 2007, and the Group already
applies the principles following the Revised IAS 23.
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Revenues from the sale of services and long-term manufacturing
projects are recognised in the
income statement according to the project‟s level of completion
provided the outcome of the
transaction can be estimated reliably. Progress is measured as
the number of hours spent
compared to the total number of hours estimated. When the
outcome of the transaction cannot
be reliably estimated, only revenues equal to the project costs
incurred, are recognised as
revenue. The total estimated loss on a contract will be
recognised in the income statement
during the period when it is identified that a project will
generate a loss.
Interest income is recognised in the income statement based on
the effective interest rate
method as the income is accrued.
2.7 Foreign currency Transactions in foreign currency are
translated at the rate applicable on the transaction date.
Monetary items in a foreign currency are translated into EUR
using the exchange rate
applicable on the balance sheet date. Non-monetary items that
are measured at their historical
price expressed in a foreign currency are translated into EUR
using the exchange rate
applicable on the transaction date. Non-monetary items that are
measured at their fair value
expressed in a foreign currency are translated at the exchange
rate applicable on the balance
sheet date. Changes to exchange rates are recognised in the
income statement as they occur
during the accounting period.
2.8 Segments For management purposes, the Group will be
conducting business within two business
segments when the units under construction have been completed
and delivered to customer.
The business segments are transport and offshore installation of
heavy structures for the energy
industry, and accommodation. The reportable segments will be
based on the business being
performed, and will be used by the chief operation
decision-maker for assessing performance
and allocating resources. As the Group at present is in the
construction phase of the units, the
Group yet has to earn revenues within the segment, and thus has
no reportable segments as of
31 December 2009.
2.9 Borrowing costs Borrowing costs directly attributable to
acquisition, construction or production of qualifying
assets, which are assets that necessarily take a substantial
period of time to get ready for their
intended use or sale, are added to the cost of those assets,
until such time as the assets are
substantially ready for their intended use or sale. All
consecutive interest expense on the
financing is added to the carrying value of the units.
Investment income earned on any
temporary investment of specific borrowings pending their
expenditure on qualifying assets is
deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are
recognised in profit or loss in the period in which they are
incurred.
2.10 Income tax Tax cost consists of tax payable and changes to
deferred tax. Deferred tax liability/tax assets
are calculated on differences between the book value and tax
value of assets and liabilities.
Deferred tax assets are recognised when there is other
convincing evidence proving that the
Group will have a sufficient profit for tax purposes in
subsequent periods to utilise the tax
asset. The Group recognises previously unrecognised deferred tax
assets to the extent it has
become probable that the Group can utilise the deferred tax
asset. Deferred tax and deferred tax
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assets are measured on the basis of the expected future tax
rates applicable, recognised at their
nominal value and classified as non-current asset investments
(long-term liabilities) in the
balance sheet. Taxes payable and deferred taxes are recognised
directly in equity to the extent
that they relate to equity transactions.
2.11 Assets under construction and other tangible assets
(non-financial) The units under construction are classified as
non-current assets and recognised at cost until the
production or development process is completed. The units under
construction are not
depreciated until the asset has been completed and is available
for use.
Tangible assets are recognised at cost less accumulated
depreciation and impairment losses.
When assets are sold or disposed of, the carrying amount is
derecognised and any gain or loss
is recognised in the income statement. The cost of tangible
non-current assets is the purchase
price, including taxes/duties and costs directly linked to
preparing the asset ready for its
intended use. Units under construction and other non-financial
tangible assets are reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying value may
not be recoverable. An impairment loss is recognised by the
excess value of the carrying value
of the asset and the recoverable amount, and recognised in the
income statement. The
recoverable amount is the higher of the asset‟s net selling
price and its value in use. The value
in use is determined by reference to the discounted future net
cash flows expected to be
generated by the asset. A previously recognised impairment loss
is reversed only if there has
been a change in the estimates used to determine the recoverable
amount, however limited by
the carrying value if no impairment loss had been recognised in
prior years.
Depreciation is calculated using the straight-line method over
the following useful life, taking
residual values into consideration. Components with different
economic useful life are
depreciated on a straight-line basis, over the components useful
life. The depreciation period
and method are assessed each year. A residual value is estimated
at each year-end, and changes
to the estimated residual value are recognised as a change in an
estimate.
Ordinary repairs and maintenance expenses are recognised in the
income statement in the
financial period in which they are incurred. Costs related to
major inspections/classification
will be recognised in the carrying value of the units if certain
recognition criteria are satisfied.
The recognition will be made when the docking has been performed
and is depreciated based
on estimated time to the next inspection. Any remaining carrying
value of the cost of the
previous inspection will be de-recognised. The remaining costs
that do not meet the recognition
criteria are recognised as repairs and maintenance expenses.
2.12 Leased Operating Equipment/Units Costs, including
depreciation, incurred in earning the lease income are recognised
as an
expense. Lease income (excluding receipts for services provided
such as insurance and
maintenance) is recognised on a straight-line basis over the
lease term even if the receipts are
not on such a basis, unless another systematic basis is more
representative of the time pattern in
which use benefit derived from the leased asset is
diminished.
Initial direct costs incurred by lessors in negotiating and
arranging an operating lease shall be
added to the carrying amount of the leased asset and recognised
as an expense over the lease
term on the same basis as the lease income.
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Leases are classified as finance leases whenever the terms of
the lease transfer substantially all
the risks and rewards of ownership to the lessee. All other
leases are classified as operating
leases. The evaluation is based on the substance of the
transaction rather than the form of the
contract, and the determination is made when the leasing
agreement is entered into. Financial
leases are accounted for as debt financed purchases of assets,
and the annual lease payments are
allocated as finance costs and amortization of the lease
liability. Capitalised lease assets are
depreciated over the shorter of the estimated useful life of the
asset and the lease term if there is
no reasonable certainty that the Group will obtain ownership by
the end of the lease term. For
operating leases, the lease payments (i.e. a time charter hire
or bareboat hire) are recorded as
ordinary operating expenses or income, and charged to profit and
loss on a straight-line basis
over the term of the relevant lease. Contingent rents are
recognized as revenue in the period in
which they are earned or as expense in the period in which they
are incurred.
2.13 Investments and Other Financial Assets The Group classifies
its financial assets in the following categories: financial assets
at fair value
through profit or loss, loans and receivables and
available-for-sale financial assets. The
classification depends on the purpose of which the investments
were acquired. Management
determines the classification of its financial assets at initial
recognition and re-evaluates this
designation at every reporting date. When financial assets are
recognised initially, they are
measured at fair value, plus, in the case of investments not at
fair value through profit or loss,
directly attributable transaction costs. The purchases and sales
of financial assets are recognised
on the trade date.
1. Financial assets at fair value through profit or loss: This
category has two sub-categories: financial assets held for trading,
and those designated at fair value through
profit or loss at inception. A financial asset is classified in
this category if acquired
principally for the purposes of selling in the short term or if
so designated by
management. Derivatives are also categorized as held for trading
unless they are
designated as hedges. Gains or losses on investments held for
trading are recognised in
the profit and loss account.
2. Loans and receivables: Loans and receivables are
non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. Loans and
receivables are carried at amortized cost using the effective
interest method, less any
allowance for impairment. Gains and losses are recognised in
income when the loans
and receivables are de-recognised or impaired, as well as
through the amortization
process.
3. Available-for-sale financial assets: Available-for-sale
financial assets are non-derivatives that are either designated in
this category or not classified in any of the other
categories. After initial recognition, available-for-sale
financial assets are measured at
fair value with gains or losses being recognised as a separate
component of equity until
the investment are derecognised, at which time the cumulative
gain or loss previously
reported in equity is included in the income statement. The fair
value of investments
that are actively traded in organized financial markets is
determined by reference to
quoted market bid prices at the close of business on the balance
sheet date. For
investments where there is no active market, fair value is
determined applying
commonly used valuation techniques.
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2.14 Impairment of financial assets At each balance sheet date
management assesses whether there are indications that a
financial
asset or a group of financial assets where changes in value are
not recognized through the
income statement are impaired. Impairment only occur if there
are objective indicators of
impairment as a result of one or more events after initial
carrying value and the events affect
the future cash flows and this can be estimated reliably. If
such impairment is indicated for loan
and receivables carried at amortized cost, the amount of
impairment loss is measured as the
difference between the asset‟s carrying amount and the present
value of estimated future cash
flows (excluding future credit losses that have not been
incurred) discounted at the financial
asset‟s original effective interest rate. The impairment loss is
recognised in profit and loss. If, in
a subsequent period, the amount of the impairment loss decreases
and the decrease can be
related objectively to an event occurring after the impairment
was recognised, the previously
recognised impairment loss is reversed. Any subsequent reversal
of an impairment loss is
recognised in the income statement, to the extent that the
carrying value of the asset does not
exceed its amortized cost at the reversal date.
2.15 Financial liabilities - Borrowings Borrowings are initially
recognised at the fair value of the consideration received less
directly
attributable transaction costs. After initial recognition,
borrowings and the related transaction
costs are subsequently measured at amortized cost using the
effective interest method. Gains
and losses are recognised in net profit or loss when the
liabilities are de-recognised as well as
through the amortization process. Borrowings containing
prepayment options are evaluated to
determine if these options are closely related to the cost
instrument or are embedded
derivatives. In assessing whether the option is closely related,
the Group consider whether the
exercise price is approximately equal to the amortized cost at
each exercise date. Prepayment
options accounted for as embedded derivatives are recorded at
fair value.
2.16 Derecognition of financial assets and liabilities A
financial asset is derecognised when:
- The rights to receive cash flows from the asset have
expired;
- The Group retains the right to receive cash flows from the
asset, but has assumed an
obligation to pay them in full without material delay to a third
party under a „pass-through‟
arrangement; or
- The Group has transferred its rights to receive cash flows
from the asset and either (a) has
transferred substantially all the risks and rewards of the
asset, or (b) has neither transferred nor
retained substantially all the risks and rewards of the asset,
but has transferred control of the
asset.
A financial liability is derecognised when the obligation under
the liability is discharged, or
cancelled or expires. Where an existing financial liability is
replaced by another from the same
lender on substantially different terms, or the terms of an
existing liability are substantially
modified, such an exchange or modification is treated as a
derecognition of the original liability
and the recognition of a new liability, and the difference in
the respective carrying amounts is
recognised in profit or loss.
When a convertible bond loan is converted to shares, the
difference between the subscription
price for the shares and the market value is recognized in the
statement of comprehensive
income. Further, any difference between the book value of the
loan derecognized at the date of
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15
conversion and the new equity from the debt conversion is also
recognized in the statement of
comprehensive income.
2.17 Cash and cash equivalents Cash includes cash in hand and at
bank. Cash equivalents are short-term liquid investments that
can be immediately converted into a known amount of cash and
have a maximum term to
maturity of three months.
2.18 Equity Equity and liabilities
Financial instruments are classified as liabilities or equity in
accordance with the underlying
economical realities.
Interest, dividend, gains and losses relating to a financial
instrument classified as a liability are
recognised in the income statement. Amounts distributed to
holders of financial instruments
that are classified as equity will be recognised directly in
equity.
Convertible bonds and similar instruments including a liability
and/or an equity element are
divided into two components when issued, and these are
recognised separately as a liability or
equity.
Costs of equity transactions
Transaction costs directly related to an equity transaction are
recognised directly in equity after
deducting tax expenses.
2.19 Employee benefits Defined contribution plans
The Group has defined contribution retirement benefit plans. A
defined contribution plan is a
pension plan under which the Group pays fixed contributions into
a separate entity, and has no
further obligations. Contributions to defined contribution
retirement benefit plans are
recognised as an expense when employees have rendered service
entitling them to the
contributions.
Share options/warrants
The Group has previously issued equity-settled share-based
payments to board members.
Equity-settled share-based payments are measured at fair value
(excluding the effect of non
market-based vesting conditions) at the date of grant. The fair
value determined at the grant
date of the equity-settled sharebased payments is recognised as
an expense over the vesting
period, based on the Group‟s estimate of the shares that will
eventually vest and adjusted for
the effect of non market-based vesting conditions. Fair value is
measured using the Black-
Scholes pricing model. The expected life used in the model has
been adjusted based on
management‟s best estimate, for the effects of
non-transferability, exercise restrictions and
behavioural considerations
2.20 Provisions A provision is recognised when the Group has an
obligation (legal or self-imposed) as a result
of a previous event, it is probable (more likely than not) that
a financial settlement will take
place as a result of this obligation and the size of the amount
can be measured reliably. If the
effect is considerable, the provision is calculated by
discounting estimated future cash flows
-
16
using a discount rate before tax that reflects the market‟s
pricing of the time value of money
and, if relevant, risks specifically linked to the obligation. A
provision for a guarantee is
recognised when the underlying products or services are sold.
The provision is based on
historical information on guarantees and a weighting of possible
outcomes according to the
likelihood of their occurrence. Restructuring provisions are
recognised when the Group has
approved a detailed, formal restructuring plan and the
restructuring has either started or been
publicly announced. Provisions for loss-making contracts are
recognised when the Group‟s
estimated revenues from a contract are lower than unavoidable
costs which were incurred to
meet the obligations pursuant to the contract.
2.21 Earnings per share Basic earnings per share are calculated
by dividing net profit /(loss) for the year by the
weighted average number of shares outstanding in the relevant
period. Diluted earnings per
share are calculated based on the if-converted method; the
profit/(loss) for the Group divided
by the average number of outstanding shares weighted over the
relevant period and the
potential number of shares converted, if the criteria for
conversion is fulfilled.
2.22 Consolidation Basis for consolidation: The consolidated
financial statements include Master Marine AS and
its subsidiaries as of December 31 for each year. The financial
statements of the subsidiaries
are prepared for the same reporting year as the parent company
using consistent accounting
policies. All intercompany transactions and balances are
eliminated in the consolidation.
Subsidiaries are fully consolidated from the date of
acquisition, being the date on which the
Group obtains control, and continues to be consolidated until
the date that such control ceases.
3. Income and Segment Information
The Group has no reportable segments as of 31 December 2009 and
2008, as the units
constituting the business segments currently are under
construction.
The income of TEUR 2,740in 2009 is mainly for engineering and
planning work related to the
contract for installation of wind turbines with Scira Offshore
Energy.
4. Other Operating Expenses
Marketing 349 190
Repair and maintenance costs 1
Rental and leasing costs 596 101
Travel costs 472 273
Consultancy fees and external personnel 3,067 1,363
Office and administrative costs 500 91
Termination equipment contracts 4,563
Legal setlement 119
Other operating costs 318 152
Total operating costs 5,423 6,734
2009 2008
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17
The contract with ConocoPhillips for use of one unit as
accommodation at Ekofisk implies
modifications of the unit. Some of the ordered equipment will
not be installed. Based on an
analysis of the value of usable equipment for spare parts (see
note 14) the rest of the cost
(TEUR 4,563) was charged as an expense in 2008.
First Securities ASA instituted in 2007 legal proceedings
against Kaupthing ASA regarding the
termination of a financial advisor‟s agreement between the two
parties in connection with
Master Marine‟s share and bond offerings in 2007. Kaupthing had
recourse against Master
Marine if First Securities should succeed in its claim. The case
was settled in 2009 with a cost
of NOK 1 million (TEUR 119) for Master Marine.
VAT is not included in the audit fees specified above.
5. Salary and personnel expense and management remuneration
Pension plan
The Group has a defined contribution plan, covering 5 % of the
salary between 1-6 G and 8 %
of the salary between 6-12 G.
The contributions recognized as expenses in the income statement
equaled TEUR 138 and
TEUR 17 in 2009 and 2008 respectively.
Management remuneration
The table below shows the names and remunerations for the
management team and the board of
directors in Master Marine.
Specification auditor's fee
(1.000 EUR)
Statutory audit 46 32
Tax related services 10 24
Other services 14
Total auditor’s fee 70 56
2009 2008
(1.000 EUR) 2009 2008
Salaries and holiday pay 2,056 1,739
Pension costs defined contribution plans 140 17
Share based compensation (warrants) 59
Other personnel expenses 671 125
Total salaries and personnel expense 2,867 1,923
The number of man-years employed during the financial year 27.5
18
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18
(1.000 EUR)
Management
Per M. Johansson (CEO) 230 24 12 265
Anders Bruun-Olsen (CFO) 164 1 8 173
Board of directors
Geir Sandvik (Chairman to
04.11.2009, ordinary
member after that)
49 49
Tom Røtjer (board member
to 04.11.2009)28 28
Rebekka Glasser Herlofsen
(board member to
04.11.2009)
28 28
Bente Thiis Thornton
(board member to 28 28
04.11.2009)
Jetmund Hanssen (board
member to 04.11.2009)28 28
Total remuneration 162 394 25 19 601
2009
Board
compensation
Salary Benefits
in kind
Defined
contribution
pension plan
Total
remuneration
Options
held
(1.000 EUR)
Management
Per M. Johansson (CEO) 247 25 3 275Anders Bruun-Olsen (CFO) 190
2 3 195
Board of directors
Tom Vidar Rygh (Chairman
of the board from 23.07 to
14.05.08)
31.3
Arne Wenger (Chairman
from 14.05.08 – 26.09.08)31.3 500,001 *
Geir Sandvik (Chairman
from 26.09.08)15.2
Tom Røtjer (board member
from 23.11.07)36.5 300,000
Rebekka Glasser Herlofsen
(board member from
23.11.07)
36.5 300,000
Bente Thiis Thornton (board
member from 23.11.07)36.5 300,000
Jetmund Hanssen (board
member from 1997)36.5 300,000
Total remuneration 223.8 437 27 6 470 * These have been
forfeited, as the holder is no longer a member of the board.
Total
remuneration
Options
held
2008
Board
compensation
Salary Benefits
in kind
Defined
contribution
pension plan
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19
On the annual general meeting on 14 May 2008 the members of the
board of directors were
granted warrants in three different programs. On the annual
general meeting on 29 June 2009
the warrants programs were somewhat altered, without any
material bearings on the programs.
As the previous board members, that were granted the warrants,
have not transferred the
warrants to the present board members, none of the present board
members are part of the
programs. Any issuance of shares pursuant to the warrants is
conditional upon the holder of the
warrant being a member of the board of directors at the time the
holder exercises his rights
under the warrant, hence no board members hold any warrants.
Hence Master Marine considers
the warrants programs for ended.
Shares held by management and members of the board as of 3 March
2010:
The only person in the top management and the board of directors
currently holding shares are
Anders Bruun-Olsen who has 59110 shares (0,003% of total
shares). He also has share warrants
as investor. See note 17 for additional information about the
warrants program. Bruun-Olsen
has resigned his position and from April 2010 he is no longer
part of the Group.
6. Transactions with related parties
The owners behind the principal shareholder have provided us
with a term loan of EUR 140
million with a subscription fee of EUR 10 million. The Group had
not drawn on the loan at the
year end, but drew EUR 50 million in January 2010. The owners
behind the principal
shareholder also took over the EUR 60 million bond loan as part
of the refinancing of the
company.
The Group has a framework agreement with Semar AS (“Semar”)
under which Semar supplies
Master Marine with marine engineering, maritime operations,
management and administrative
assistance, at agreed rates per hour. Former member of the Board
of Directors Jetmund
Hanssen (retired 04.11.2009), owns 19 % of the shares in the
company Luen AS, is employed
with Semar, and hired by Master Marine as a project manager
under the framework agreement.
The company Luen AS, which has been demerged from Semar, owns
0,13 % of the shares in
Master Marine and also some of the shares in Semar.
Based on the framework agreement, the Group purchased services
from Semar of total TEUR
2,249 (TEUR 1,058 in 2008).
All the transactions with related parties are carried out at
arm‟s length prices.
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20
7. Financial income and expenses and net effect embedded
derivative convertible bond (CB)
The financial income/expenses related to changes in terms of the
convertible loan and the
changes in fair value of the derivative of the convertible bond
are shown separately.
For additional information about the convertible bond and the
embedded derivate, see note 9.
Other financial income is related to the refinancing of the
Group in October 2009. For
additional information see note 9.
8. Investments and other financial instruments
Classification of financial assets and liabilities as of 31
December 2009:
(1.000 EUR)
Financial income
Interest income 632 2,458
Foreign exchange gains 16,199 4,118
Other financial income 36,000
Total financial income 52,831 6,576
Financial expenses
Interest expense 355 2
Foreign exchange losses 18,205 1,850
Other financial expenses
Total financial expenses 18,561 1,852
Changes related to the convertible bond loan
Changes in fair value of derivative of CB 7,573 5,112
Changes in the terms of the bond loan -2,219
Net effect embedded derivative CB 7,573 2,893
2009 2008
(1.000 EUR)
Financial assets
Other current assets 3,102
Cash and cash equivalents 21,890
Total financial assets 24,992
Financial liabilities
Convertible bond
Embedded derivative of convertible bond
Other long term liabilities 50,396
Accounts payable 10,432
Other current liabilities 8,960
Total financial liabilities 50,396 19,392
Loans and
receivables
Financial liabilities at
fair value through
profit and loss
Other
financial
liabilities
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21
Classification of financial assets and liabilities as of 31
December 2008:
9. Loans
Convertible bond loan
The Group issued a convertible bond of NOK 420 million in May
2007. In connection with the
share issue and the new bond loan in Q2, 2008, the convertible
bond loan was renegotiated. A
lower strike price (NOK 13.65) and an extension of the maturity
from 2010 to 2012 resulted in
an increased market value of the conversion rights, which
represents a financial cost. The
extension of the maturity of the convertible bond gave rise to a
reduced amortized cost. The net
effect of these changes in the terms of the bond loan is a cost
of approximately EUR 2.2 million
in 2008.
Each bond had a nominal value of NOK 1. The convertible bond had
the maturity date 16 May
2012 with an option to convert to shares after 30 May 2008. The
bond carried a fixed interest
rate of 6 % per annum (PIK note), payable on the maturity date.
The loans run without
instalments.
The conversion price was NOK 13.65, subject to adjustment in the
events of new share issues
or other equity transactions. Hence the bonds were convertible
on the basis of one ordinary
share for every 13.65 bonds held, a total of 33,756,923 shares.
The conversion right was not
separable from the bond. The Group was to maintain an equity
ratio in excess of 18 %, as well
as standard financial covenants. The covenants were fulfilled as
of 31 December 2008.
As the functional currency of the Group is EUR, the entire
foreign currency convertible bond
was accounted for as a liability, comprising a host foreign
currency debt instrument subject to
the translation rules of IAS 21 and an embedded derivative
liability with equity and foreign
currency characteristics being fair valued through profit or
loss in accordance with IAS 39. The
initial carrying amount of the bond (the host instrument) was
the residual amount after
separating the embedded derivative.
(1.000 EUR)
Financial assets
Other current assets 1,986
Cash and cash equivalents 95,464
Total financial assets 97,450
Financial liabilities
Convertible bond loan 40,118
Embedded derivative of convertible bond 7,629
Other long term liabilities 58,462
Accounts payable 21,537
Other current liabilities 4,332
Total financial liabilities 58,462 7,629 65,987
Loans and
receivables
Financial liabilities at
fair value through
profit and loss
Other
financial
liabilities
-
22
The fair value of the embedded derivative was estimated by
applying the Black-Scholes model,
using volatility of 80 % on 31 December 2008, and a share price
of NOK 6 on 31 December
2008. The interest rate applied in the model was the zero coupon
interest rate of an option
having similar expiration, being 3.275 % as of 31 December
2008.
The market value of the liability of the embedded derivative was
EUR 7.6 million as of 31
December 2008.
The fair value calculations are subject to uncertainty due to
non-quoted market prices and the
use of a valuation model.
In 2009 the Group went through a financial restructuring,
including a conversion of the Bond
loan. The Bond loan was converted into 210,000,000 shares at a
subscription price of NOK
2.292. At the same time, 1,863,333,333 new shares were issued,
at a subscription price of NOK
0.60 per share, representing the market price for the shares
being converted from the Bond
loan. The difference between subscription price for the shares
issued in relation to the debt
conversion (NOK 2.292) and market value (NOK 0.60) is recognised
as a financial income of
NOK 355 million / EUR 42 million in the statement of
comprehensive income (and allocated
directly to share premium). The difference between the book
value of the loan derecognised at
date of conversion, NOK 428 million and new equity from the debt
conversion of NOK 481
million is recognised as a financial expense of NOK 53 million /
EUR 6 million, resulting in a
net financial income if EUR 36 million related to the debt
conversion.
The embedded derivative is derecognized accordingly, resulting
in a fair value change of EUR
7.6 million in the statement of comprehensive income.
Bond loan
EUR 60 million was raised in June 2008 as a 3 year senior
secured FRN bond loan with call
options after year 1 and 2. The options have not been called.
The coupon on the loan is 3
months EURIBOR + 12 %.
Term loan
In connection with the above mentioned financial restructuring,
the Group signed a term loan
facility of EUR 140 million. As of 31.12.2009, the Group has not
drawn on this facility. The
subscription fee paid of EUR 10 million has been amortized over
the loan period, 21 months.
The loans have security in a selection of assets. The term loan
has seniority to the “bond loan.
The loans will have security in the units when completed.
10. Financial Instruments and Risk Management
Risk Management Overview
The Group is exposed to a number of different financial market
risks arising from the Group‟s
normal business activities. Financial market risk is the
possibility that fluctuations in currency
exchange rates, interest rates and time charter/bare boat rates
will affect the value of the
Group‟s assets, liabilities or future cash flows. To reduce and
manage these risks, the Group
periodically reviews and assesses its primary financial market
risks. Once risks are identified,
appropriate action is taken to mitigate the specific risk. The
Group aim to minimize the
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23
currency risk by balancing receivables and liabilities per the
currencies relevant to the Group. It
is the policy of the Group to hold liquid funds in EURO, USD,
SGD and NOK.
Operational Project Risk
Master Marine AS started in 2008 to work for ISO certifications,
9000:1, 14000:1 and 18001:1,
and plans to complete the certifications during 2010. Several
mitigations to monitor risks have
been established during 2009 and the Group continues to improve
the processes. Clear levels of
approval have been introduced, defining different
responsibilities internally.
All disciplines have gone through a risk identification process.
This is coordinated by the Risk
manager and is closely followed up. Each month the management is
presented the results after
risk identification, and risk reducing mitigations are decided
and implemented.
Master Marine signed a contract with ConocoPhillips in October
2008 and a contract with Scira
Offshore Energy in April 2009. This has resulted in the need to
build up a system to handle
operational risk. Responsibility for ongoing risk assessments
rests with the Risk Manager and
the project team.
There are pointed out 9 specific risk groups which are followed
up. These are:
1. HSE risk 2. Contractual risk 3. Schedule risk 4. Resource
constraints risk 5. Cost control and cost escalation risk 6.
People, organization and process risk 7. Marine operations risk 8.
Compliance risk
9. Financial risk
These risk areas are closely followed up by the project team and
the management. The main
goal is to point out the significant risks in the different
categories and introduce risk reducing
activities.
Currency Risk
The functional currency of Master Marine is EURO. The Group has
two units under
construction, of which the contractual amounts mainly are in
EURO. The additional funding
raised in October 2009 was in EURO. The Group assumes that the
operating income and costs
mainly will be in Euro when the units have been delivered, with
the exception of the
administrative and other operating expenses that will be
denominated in NOK. The Group may
also do business in USD denominated areas, where operating
income will be denominated in
USD. This exposes the Group to a moderate foreign exchange
risk.
The following table shows the sensitivity to a reasonable
possible change in the EUR exchange
rate, with all other variables held constant, of the Group‟s
profit before tax.
+/- % point in exchange rate
EUR/NOK
Effect on profit before tax
(1.000 EUR)
Effect on equity
(1.000 EUR)
2009 20 -17/28 -17/28
2008 20 -15/17 -15/17
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24
Interest Rate Risk
The Group‟s risk related to interest rate risk is considered to
be limited. The Group has a high
yield bond with firm credit spread in addition to the
fluctuating EURIBOR and a MEUR 140
loan with a fixed interest rate The Group‟s objective related to
management of risk is to
minimize the exposure to variability of cash flow related to
changes in interest rates.
Interest rate risk table: The following table demonstrates the
sensitivity to a reasonable possible
change in interest rates, with all other variables held
constant, of the Group‟s profit before tax:
Credit Risk
It is the Group‟s policy only to trade and make deposits with
recognized, solid third parties.
Receivable balances are monitored on an ongoing basis with the
result that the Group‟s
exposure to bad debts is not significant. The maximum exposure
is the carrying amount as
disclosed in note 14.
In connection with the Group‟s building projects, prepayments
are made to suppliers and the
shipyard, and the Group has a small concentration of prepayments
to these vendors. The
exposure is consistently monitored and assessed. All
installments to the yard are covered by
refund guarantees from banks approved by Master Marine. The risk
for a significant default
situation is hence considered limited. Total prepayments as of
31 December 2009 amounted to
EUR 186 million.
Liquidity Risk
The Group monitors its risk to a shortage of funds by closely
monitoring the maturity of both
its financial investments and financial assets, and projected
cash flow from operations. In
October 2009 the Group secured additional funding of EUR 130
million in new equity and
EUR 140 million in a term loan. In addition to this the
convertible bond was converted to
equity.
The Group is currently working on refinancing the term loan with
a bank facility with lower
cost. The first step of this process is expected to be completed
in Q2 2010.
The table below summarizes the maturity profile of the Group‟s
financial liabilities based on
contractual undiscounted cash flow:
+/- basis points in interest
rate
Effect on profit before tax
(1.000 EUR)
Effect on equity
(1.000 EUR)
2009 50 293/-293 293/-293
2008 50 392 / -392 392/-392
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25
Capital Management
The primary objective of the Group‟s management is to ensure
that it maintains a strong credit
rating and healthy capital ratios in order to support its
business and maximize shareholder
value. The Group manages its excess liquidity from loan and
equity with low risk placements.
All financial capital is currently placed in bank accounts.
Financial Instruments, Fair Value of Financial Instruments
Set out below is a comparison by category for carrying amounts
and fair values of all of the
Group's financial instruments that are carried in the financial
statements. The following
estimated fair value amounts of the Group‟s financial
instruments have been determined by the
Group, using appropriate market information and valuation
methodologies. The carrying
amount of cash and cash equivalents are a reasonable estimate of
their fair value.
The Group has bought NOK and sold EUR spot during 2009. This is
related to running of the
offices and payments to different Norwegian suppliers. It has
also bought USD and SGD and
sold EUR for building of additional spud cans (add-ons) in Dubai
and miscellaneous costs in
Singapore/Batam (Indonesia) respectively, including payments of
VO‟s to the yard.
At 31.12.2009
(1.000 EUR)
Vessels under construction 18,539 226,458 3,440 1,200
249,637
Senior bond 60,000 60,000
Trade and other payables 8,380 8,380
At 31.12.2008
Vessels under construction 49,033 198,958 106,110 354,101
Convertible bond 68,381 68,381
Senior bond 60,000 60,000
Trade and other payables 217 217
Total3 to 12
months
Less than
3 months
Over 5
years
1 to 5
years
(1.000 EUR)
Fair
value
Other current assets 3,102 3,102
Other financial assets
Cash and cash equivalents 21,890 21,890
Total financial assets 24,992 24,992
Long-term liabilities 50,396 50,396
Accounts payable 10,432 10,432
Other current liabilities 8,960 8,960
Total financial liabilities 69,788 69,788
Carrying
value
31.12.2009
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26
11. Income tax
Reconciliation of the effective rate of tax and nominal tax rate
applicable to Master Marine AS:
Deferred tax and deferred tax assets:
As the Company at present does not have appreciable operating
income, deferred tax asset is
not recognized in the balance sheet as of 31 December 2009.
The Company has a total tax loss carried forward of EUR
49,670,835 as at 31 December 2009
(2008: 18,492,455) which never expires.
(1.000 EUR)
Tax payable 0 0
Changes in deferred tax 0 0
Income tax expense 0 0
Tax payable for the year 0 0
Correction of previous years current income taxes 0 0
Total tax payable 0 0
2009 2008
(1.000 EUR)
Pre-tax profit/(loss) 29,523 -876
Expected income taxes according to income tax rate 28 % 8,266
-245
Non deductable expenses 1,498 10
Non-taxable income
Deferred tax asset from losses carried forward not recognized in
balance sheet 7,484 2.986
Other -17,249 -2.751
Income tax expense 0 0
2009 2008
(1.000 EUR) 2008
Deferred tax assets
Long term liabilities at amortised cost 140
Tax losses carried forward 13,908 5,178
Deferred tax assets - gross 13,908 5,318
Deferred tax liabilities
Property, plant and equipment 3,879 2,773
Other investments at fair value
Other
Deferred tax liabilities - gross 3,879 2,773
Net unrecognised deferred tax assets/(liabilities) 10,029
2,545
2009
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27
12. Non-current assets
Property, plant and equipment
Depreciation of other assets is based on the economic life of
the asset (5-10 years) using a
linear depreciation method. Depreciation of the units under
construction will first start when
they are finished.
In 2007 the Group entered into a construction contract with
Drydocks World Graha (former
Labroy Offshore Ltd) for the building of two Jack-up
construction vessels. In 2008 the Group
entered into a contract with ConocoPhillips for the use of one
of the units as accommodation
unit at Ekosfisk for 3 years. The Service Jack 1 has been
modified to a Jacktel to adjust to this
job. The two units will be delivered in Q2 and Q3 2010 according
to the latest plans. The units
will be delivered on a turn-key lump sum basis, whereby Drydocks
World is responsible for
engineering, procurement, construction, commissioning, testing.
All long lead items forming
part of the Owners Furnished Equipment ("OFE") under the
construction contracts for the two
units have been duly ordered by Master Marine.
A large portion of the additions in 2008 and 2009 represent
prepayments to the shipyard in
agreement with the construction contracts. These are subject to
refund guarantees from banks
approved by Master Marine. Another part is related to owner
furnished equipment and
construction contracts related to the modifications of the
original Service Jack 1 based on the
Ekofisk contract.
(1.000 EUR)
Total
Accumulated cost 1
January135,432 304 135,736 56,331 113 56,444
Realisation -31 -31
Additions 186,785 25 186,809 79,101 222 79,323
Accumulated cost 31
December322,216 329 322,545 135,432 304 135,736
Accumulated depreciation
1 January-66 -66 -26 -26
Depreciation -59 -59 -40 -40
Impairment -6,711 -6,711
Accumulated depreciation
and impairment 31
December
-6,711 -125 -6,837 -66 -66
Carrying value 31
December315,505 203 315,709 135,432 238 135,670
2009 2008
Other fixed
assets
Other fixed
assets
Vessels under
construction
Vessels under
construction
Total
The capitalized amounts on the units include (1.000 EUR):
Construction contracts (yard and others) 155,364 67,138
Project management and engineering costs 16,935 2,965
Financial items 14,486 8,999
Capitalized amounts on the units for the year 186,785 79,101
2009 2008
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28
Impairment indicators
At each reporting date, as assessment is made according to IAS
36.9, on whether internal or
external information indicates a potential fall in the value of
non-current assets.
During 2009 the market has improved and different broker
estimates indicates a small increase of value compared to valuation
received in the end of 2008.
The market is still a bit unstable and volatile.
The Group has based on this performed an impairment test to
ensure the value of the units is
equal or higher than the carrying value.
Value Jacktel
In connection with a planned transfer of the unit and its
contracts from Master Marine AS to
Jacktel AS the company performed a value estimation that showd
an impairment of MEUR 6.7
million. The impairment has been accounted for in the Statement
of Comprehensive income in
2009.
Value Service Jack 2
The unit is under construction as of December 31, 2009. The
value assessment for the respect
of impairment is done using the value in use principle (IAS
36.66). Net calculated value of the
unit is greater than the book value as of 31.12.2009 and no
impairment was charged the unit in
2009 (IAS 36.104). The calculations was done using a 10.5%
discount rate factor, and future
cash flow representing management best estimate, with no growth
for non-contractual income.
Sensitivity analysis
At year-end a sensitivity analysis is performed in order to
analyze the consequences of variance
in parameters used in the value-in-use calculation. When
applying a discount rate of 14.9% for
Service Jack 2, value in use equals book value. The below matrix
illustrates calculated
impairment given a fall in estimated day rate income and
different discount rate.
Intangible assets
Sensitivy analysis Service Jack 2
(1000 EU)
0% fall in estimated Day Rate 0 0 0
10% fall in estimated Day Rate 0 0 0
20% fall in estimated Day Rate 0 -7,748 -20,897
9.5 % 10.5 % 11.5 %
(1.000 EUR)
Accumulated cost 1 January
Realisation
Additions 220
Accumulated cost 31 December 220
Accumulated depreciation 1 January
Depreciation
Accumulated depreciation 31 December
Carrying value 31 December 220
2009
Intangible assets
2008
Intangible assets
-
29
The intangible assets are computer software related to the
operation of the units and operation
of the Group in general.
Subsidiary companies
Master Marine has two fully owned subsidiaries, Jacktel AS
(organization number
994,152,300) and SPC L206 (organization number 994,151,932).
Master Marine has 100% of
the voting rights in the subsidiaries. The companies was funded
in 2009 and they were part of
the consolidations for the first time in 2009.
13. Contractual obligations
The table discloses contractual obligations the next five years
in accordance with the
obligations of the Group, mainly incurred in connection with the
units under construction.
14. Other current assets
Spare parts consist of usable equipment ordered for Jacktel
which will not be installed on the
unit due to modifications on the unit for the Ekofisk contract.
The values have been evaluated
again in 2009. For additional information regarding spare parts
please see note 4.
The Group had four trade receivables as of 31 December 2009. All
with solid clients and there
is no reason for bad debt provision.
15. Cash and cash equivalents
Cash and cash equivalents include demand deposits and all highly
liquid financial instruments
purchased with maturities of three months or less.
(1.000 EUR) 2009 2008
2009 n/a 248,421
2010 245,532 106,519
2011 1,870 346
2012 380 348
2013 390 350
2014 400
After 2014 1,600
Total 250,172 355,984
(1.000 EUR)
Trade debtors 715 203
Pre-paid expenses 234 70
Spare parts 1,253 1,252
Other current assets 30 4
VAT refund 870 456
Total other current assets 3,102 1,986
2009 2008
-
30
Restricted cash in 2009 amounts to TEUR 424 and TEUR 177 in
2008.
16. Earnings per share
The basic earnings per share are calculated as the ratio of the
profit/(loss) for the year that is
due to the shareholders divided by the weighted average number
of ordinary shares
outstanding.
Warrants issued (see note 17 for details) are not in-the-money
as of 31 December 2009, and as
such not dilutive as of the reporting date, and not considered
in the calculations of dilutive
earnings per share.
17. Share capital and shareholder information
Changes to share capital and premium:
(1.000 EUR) 2009 2008
Cash 21,890 78,455
Cash equivalents 17,009
Cash and cash equivalents in the balance sheet 21,890 95,464
Cash and cash equivalents in the cash flow statement 21,890
95,464
(1.000 EUR) 2009
Average number of shares outstanding 627,059,014 66,423,557
Effect of dilutive potensial ordinary shares:
Convertible bonds
Share options
Diluted average number of shares
outstanding627,059,014 66,423,557
Profit /(loss) 29,522,600 -876,367
Earnings per share: 2009 2008
- Basic 0.05 -0.01
- Diluted 0.05 -0.01
2008
Total number of shares 2,150,754,967 77,421,634
Nominal value pr share NOK 0.1 NOK 0.1
20082009
Ordinary shares
At 1 January 77,421,634 52,829,660 954 647 100,029 70,284
Share issues 2,073,333,333 24,591,974 22,298 306 103,256
30,209
Debt conversion 2,503 12,513
Profitt/loss allocated to share premium 29,523 -464
At 31 December 2,150,754,967 77,421,634 25,754 954 245,320
100,029
Premium (TEUR) Share capital
(TEUR)20082009
No. of shares
2009 200820082009
-
31
Issue cost related to the share issue has been deducted from the
share premium fond.
The nominal value per share is NOK 0.1 after a share split in
the range of 1 to 10 was resolved
on the general assembly 19 January, 2007.
All issued shares have equal voting rights and the right to
receive dividend.
For calculation of earnings pr share and diluted earnings per
share please be referred to note 16.
The 20 largest shareholders as of 26 March l 2010 are:
In 2007 the Group issued warrants to all shareholders on a pro
rata basis, 5,925,000 in total,
vesting in 2010, 2011 and 2012 respectively (1/3 each year). The
subscription price is NOK
12.50. The actual number of shares that may be subscribed varies
depending on the share price
(Figures in TEUR)
Opening balance 01.01.2008 647 70,284 412 71,343
Share issue 306 30,209
Issue of warrants 59
Net income ( loss ) -464 -412
Balance 31.12.2008 953 100,029 59 101,042
Share issue 22,298 103,256
Debt conversion 2,503 12,513
Net income (loss) 29,523
Balance 31.12.2009 25,754 245,320 59 271,133
Share
capital
Share
premium
Other paid
in capitalRetained
earnings
Total
equity
Name Account
type
Country of
origin
Number of
shares
Ownner
interest
Crystal Violet BV NLD 1,736,518,874 80.74 %
Rector Marinus Invest NOR 139,757,374 6.50 %
Goldman Sachs Int. - Security Client Segr NOM GBR 70,022,001
3.26 %
Bank of New York Mel BNY GCM Client Account NOM GRB 40,289,334
1.87 %
Deutsche Bank AG LON Prime Brokerage Full NOM GBR 33,860,632
1.57 %
Clearstream Banking CID Dept. Frankfurt NOM LUX 13,894,167 0.65
%
UBS AG, London Branc S/A IPB Segregated C NOM GBR 12,501,133
0.58 %
Canica AS NOR 10,105,833 0.47 %Brown Brothers Harri S/A
Oppenheimer Ques USA 9,994,100 0.46 %
Labroy Marine LTD SGP 8,726,400 0.41 %
Pareto Growth AS NOR 8,165,403 0.38 %
Sissener Sirius ASA C/O Storebrand Kap.F NOR 7,018,000 0.33
%
Sissener Jan Petter Wilhelm C JPMBLSA RE NORDEA BA NOR 4,947,333
0.23 %
Euroclear Bank S.A./25% Clients NOM BEL 4,118,339 0.19 %
Pareto Energy Solutions NOR 3,878,000 0.18 %
Freyer Holding AS NOR 3,612,000 0.17 %
Tanja A/S NOR 3,583,333 0.17 %
Wiese Lars Christian Ucher NOR 3,240,500 0.15 %Oslo
Pensjonsforsikring NOR 3,168,000 0.15 %
Tollefsen Ivar Erik NOR 2,916,667 0.14 %
Total 20 largest shareholders 2,120,317,423 98.58 %
Other 30,437,544 1.42 %
Total shares 2,150,754,967 100.00 %
-
32
in certain intervals prior to the subscription. If the increase
in share price over the subscription
price for the certain period is less than 11.99 %, no warrants
can be exercised.
18. Accounts payable and other current liabilities
The pre-payments are related to the ConocoPhillips contract.
These payments will be
recognized in the comprehensive income on a straight line basis
from Q3, 2010 when the lease
period starts.
19. Legal issues
The Group has currently no legal issues pending.
20. Events after the balance sheet date On 9 April 2010 Master
Marine‟s subsidiary Jacktel signed for a bank loan of EUR
150,000,000. The loan is given by NIBC Bank N.V, Forties Bank
(The Netherlands) N.V, and
DVB Bank SE. In addition Eksportfinans and GIEK have
participated with loans for
Norwegian content. The loan should secure the completion of L205
and the start up of
operations under the ConocoPhillips contract. Master Marine is
guaranteeing for the loan. Part
of the loan, EUR 22,350,000 is sales compensation between Master
Marine and Jacktel and
will be paid back when Jacktel make the first draw down on the
loan.
In April 2010 L205 and its contracts were transferred to the
fully owned subsidiary Jacktel AS.
This resulted in impairment of MEUR 6.7 million.
(1.000 EUR) 2009 2008
Trade accounts payables 10,432 21,537
Government taxes, tax deductions etc. 256 257
Pre-payments from customers 1,824
Other short term liabilities 6,881 4,075
Total 19,392 25,869
-
33
FINANCIAL STATEMENTS 2009
Master Marine AS
Comprehensive Income
1 January - 31 December
2009 2008
3 2,740 203
TOTAL OPERATING INCOME 2,740 203
5 -2,867 -1,923
4 -5,423 -6,734
Impairments 12 -6,711
12 -59 -40
-15,060 -8,697
OPERATING PROFIT / (LOSS) -12,320 -8,494
7 52,831 6,576
7 -18,561 -1,852
34,270 4,724
21,950 -3,769
Changes in terms conv. Bond 7.9 -2,219
7.9 7,573 5,112
29,523 -876
29,523 -876
Statement of Comprehensive Income
Net profit this period 29,523 -876
Other comprehensive income
COMPREHENSIVE INCOME 29,523 -876
Allocation of comprehensive income
Share premium reserve 29,523 -464
Retained earnings -412
Earnings per share:
- Basic 0.05 -0.01
- Diluted 0.05 -0.01
Notes
Audited Audited
Financial expenses
(In EUR 1.000)
Income
OPERATING EXPENSES
Salary and personnel costs
Other operating expenses
Depreciation
TOTAL OPERATING EXPENSES
FINANCIAL INCOME AND EXPENSES
Financial income
(In EUR 1.000)
NET PROFIT (LOSS)
NET FINANCIAL ITEMS
Net result before changes in fair value of
derivative of convertible bond (CB)
Changes in fair value of derivative of CB
PROFIT/(LOSS) BEFORE TAX
Income tax expense (benefit)
-
34
Oslo, 22 April 2010
Master Marine AS
Statement of Financial Position
(In EUR 1.000)
ASSETS
Non-current assets:
Property, plant and equipment 12 315,709 135,670
Intangible assets 12 220
Shares in subsidiaries 12 24
Total non-current assets 315,953 135,670
Current assets:
Other current assets 14 3,102 1,986
Cash and cash equivalents 15 21,866 95,464
Total current assets 24,968 97,450
TOTAL ASSETS 340,922 233,120
EQUITY AND LIABILITIES
Paid in capital:
Issued capital 17 25,754 954
Share premium 17 245,320 100,029
Other paid in capital 17 59 59
Total paid in capital 271,133 101,042
Other equity:
Retained earnings
Total other equity
Total equity 271,133 101,042
Non-current liabilities:
Convertible bond 9 40,118
Embedded derivative conv. bond 9 7,629
Other long-term liabilities 9 50,396 58,462
Total long-term liabilities 50,396 106,209
Current liabilities:
Accounts payable 18 10,432 21,537
Other current liabilities 18 8,960 4,332
Total current liabilities 19,392 25,869
Total liabilities 69,788 132,078
TOTAL EQUITY AND LIABILITIES 340,922 233,120
Notes
Audited Audited
31.12.2009 31 12.2008
-
35
Master Marine AS
Statement of Changes in Equity
(In EUR 1.000)
Share
Capital
Share
premium
Other paid
in capital
Retained
earnings
Total equity
Equity as at January 1, 2008 647 70,284 412 71,343
Share issues 306 30,209 30,515
Warrants to Board memebers 59 59
Profit/(loss) for the period -464 -412 -876 -
Equity as at December 2008 954 100,029 59 101,042
Share issues 22,298 103,256 125,554
Warrants to Board memebers -
Debt conversion* 2,503 12,513 15,015
Comprehensive Profit/(loss) for the
period 29,523 29,523 -
Equity as at December 2009 25,754 245,320 59 271,133
*For more information regarding the debt conversion see note
9
-
36
Master Marine AS
Cash Flow statements
(In EUR 1.000)
Cash flow from operating activities:
Profit/(loss) after tax 29,523 -876
Adjustment to reconcile profit/(loss after tax to net cash
flows:
Non-cash items:
Depreciation and impairment of property, plant and
equipment 12 6,771 40
Financial income 7 -52,831 -6,576
Financial expenses 7 18,561 1,852
Changes in fair value of financial instruments 7.9 -7,573
-5,112
Changes in terms conv bond 7.9 2,219
Working capital adjustments:
Increase in trade and other receivables 14 -1,116 -1,902
Increase in trade and other payables 18 787 4,233
Net cash flow from operating activities -5,879 -6,122
Cash flow from investing activities:
Proceeds from sale of property, plant and equipment 31
Purchase of property, plant and equipment, net of cash 12
-184,352 -49,120
Purchase of intangible assets -220
Investment in subsidaries -24
Interests received 568 4,272
Net gain financial investments
Net realized agio 3,623 2,268
Net cash flow from investing activities -180,405 -42,549
Cash flow from financing activities:
Proceeds from issue of shares 17 125,554 30,515
Net proceeds from borrowings 9 58,462
Repayment of borrowings
Interest paid -14,349 -5,234
Net cash flow from financing activities 111,204 83,743
Net increase/(decrease) in cash and cash equivalents -75,080
35,073
Net currency translation effect 1,482 -9,878
Cash and cash equivalents at beginning of period 15 95,464
70,270
Cash and cash equivalents at end of period 21,866 95,464
Audited
Year ended
December 31,
2008Notes
Audited
Year ended
December 31,
2009
-
37
Notes
1. General information
Master Marine AS (“Master Marine” or “the Company”) is a private
limited company,
incorporated in Norway. The Headquarter is in Drammensveien 288,
0283 Oslo, Norway.
Master Marine is an offsho
